Analysis Topic: Interest Rates and the Bond Market

Thursday, July 22, 2010

In an article dated July 12, I first reported that Dagong International Credit Rating Co., the largest credit rating agency of China, stripped the the U.S. and some other western nations of the AAA ratings given by its big three Western counterparts. Dagong also accused its Western rivals of not properly disclosing the repayment risk and causing the global financial crisis and current debt crisis in Europe.

Thursday, July 22, 2010

Recent economic data is pointing toward a second wave of recession … and maybe even outright deflation. One key consequence: Long-term interest rates are low and getting lower.

Today I’m going to tell you about some exchange traded funds (ETFs) that I think can thrive in this short-term, falling-rate environment. First, let’s take a look at some evidence the economy is entering the dreaded “double-dip” part of the cycle …

Wednesday, July 21, 2010

The common thought amongst even reasonably educated and economically literate Americans is that China is 'stuck with US Treasuries' and has no choice, so it must perform within the status quo and do as the US wishes, or face a ruinous decline in their reserve holdings of US Treasuries.

Wednesday, July 21, 2010

A significant feature of fiat money systems is the privilege for the custodian to commit fraud, big fraud, gargantuan fraud, even counterfeit. Fannie Mae might function as the clearinghouse for numerous massive role programs with $trillion fraud behind each, hidden from view, especially since it was conveniently nationalized. Follow some other fraud schemes, right out in the open. Surely such recount only touches the surface, but these shenanigans are advanced forms of fraud. They are smoking guns of USTreasury fraud and counterfeit, with strong whiffs of monetization. Much more monetization is to come, fully endorsed and sanctioned. Other clever techniques are being used, given the Quantitative Easing has officially been halted.

Wednesday, July 21, 2010

Some commentators on the U.S. economy and the European economy are predicting that there will be "quantitative easing" soon. This is a euphemism for central bank inflation.

I have been reporting for months that the present policy of the Federal Reserve System is to deflate the money supply. The chart of the adjusted monetary base since early March indicates this. Similarly, consumer prices have remained flat or close to it this year.

Tuesday, July 20, 2010

The crisis affecting Europe is nothing new. It goes back three years and the beginning of the credit crisis, 60% of the subprime CDOs, collateralized debt obligations, had been sold to European institutions. These were the mortgage bonds, which contained a variety of toxic waste, which the rating agencies, S&P, Moody’s and Fitch, in collusion with banks and brokerage houses, had sold as AAA bonds, when in fact their ratings should have been considerably lower. The holders of these bonds in many instances became insolvent and had to be bailed out by capital injections from central banks, most of the funds were lent by the Federal Reserve.

Wednesday, July 14, 2010

When the end-game began, gold was $35 per ounce. Today, gold is $1200. When the end-game is over, gold will be far higher.

Midway through 2010 we are approaching the end of the end-game, the resolution of the monetary imbalances that began in 1971. For more than 2500 years, gold was money: but, in 1971 that changed. After 1971, money was no longer connected to gold. For the first time in history, money had no intrinsic value

Tuesday, July 13, 2010

Despite repeated warnings going back several years from Moody's, S&P et al that the U.S. could lose its top credit rating with ongoing fiscal deficits and heavy debts, the platinum-plated AAA rating of the United States seems all untouchable.

Saturday, July 10, 2010

By David Galland, Managing Editor, The Casey Report writes: This morning I read an interesting story in Soundings magazine. It recounted the final voyage of the S.S. Morro Castle, purportedly one of the safest ships afloat back in 1934 when it regularly transported revelers on junkets between New York and Havana. Then, on the night of September 8, a series of unfortunate events occurred that ended with the ship washing up on the New Jersey shore the next day, close to half of its 300 or so passengers dead.

Friday, July 09, 2010

As Europe’s banking crisis deepens, Greece’s and Spain’s fiscal crisis spreads throughout Europe and the US economy stalls, most discussions of how to stabilize national finances assume that only two options are available: “internal devaluation” – shrinking the economy by cutting public spending; or outright devaluation of the currency (for countries that have not yet joined the euro, such as Eastern Europe).

Thursday, July 08, 2010

Summary -
In the last six months, the eurozone has faced its biggest economic challenge to date — one sparked by the Greek debt crisis which has migrated to the rest of the monetary union. But well before the sovereign debt crisis, Europe was facing a full-blown banking crisis that did not seem any closer to being resolved than when it began in late 2008. With investors and markets focused on European governments' debt problems, the banking issues have largely been ignored. However, the sovereign debt crisis and banking crisis have become intertwined and could feed off each other in the near future.

Thursday, July 08, 2010

European Central Bank (ECB) President Jean-Claude Trichet, in his press conference following the central bank’s monthly meeting, built on the more confident tone set in recent weeks. Mr. Trichet suggested improved market conditions are a reflection of the decisive and constructive actions taken by eurozone governments.

Thursday, July 08, 2010

With the economy softening and the Federal Reserve unable to provide a positive catalyst in the form of lower rates, the bond market has taken up of the slack producing lower yields. For example, mortgage rates have dropped over the past month enticing homeowners to refinance. It may not clear the glut of homes on the market or get us back to the old days of your house as an ATM machine, but lower rates do help. This appears to be a trend that will continue especially since Washington and the Fed no longer have the political will to expand the deficit.

Wednesday, July 07, 2010

During the week of June 23-June 30, the American Association of Individual Investors Survey indicated investors are much more fearful than usual. On average, 31% of individual investors are bearish. These days, 42% of investors are bearish. On average, 39% are bullish. Today, just 25% are bullish.

Wednesday, July 07, 2010

Discussions about municipal finance generally assume three absolute conditions. First, the principal and coupon of municipal bonds are guaranteed: "Municipal bonds don't default," according to trusted experts. Second, the guarantees are backed by the taxing authority of the state or municipality. Third, accrued pension benefits are guaranteed.

Wednesday, July 07, 2010

Just last week, Congress had a critical piece of legislation before it. Congress, through House bill HR 1207, could pass the bill in its entirety with a simple majority vote, and it would be included in the Financial reform overhaul bill which is currently being pushed through Congress. Should the audit bill have been added to the financial reform legislation, upon passage, the books at the Federal Reserve would be opened for audit by the GAO – at which point every citizen, politician, and investor would know within six months the extent of the actions taken by the Fed over the past 97 years of pure secrecy.

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